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Focus Media Holding Ltd. Message Board

  • paultradestoday paultradestoday Dec 12, 2008 11:32 AM Flag

    My further analysis

    I re-read the 3Q transcript and the recent news release. I REALLY like what FMCN is doing to establish a VALUE proposition. I look at 2009 and see the following:

    1. Cap Ex will be reduced from over $65M to less than $20M. No more purchases of frames. They bought 35K digital frames in 2008 which will deploy at ~2,000 per month in 2009. If they can do that..WOW! That’s a DOUBLE!!
    2. Receivables will improve with restructure of CGEN and spin-off of Allyes (by IPO or other means)
    4. No earn-outs for CGEN
    5. Reduced size of the float via buybacks
    6. managements’ commitment to focus on the bottom line

    If you back out 2008 cap ex and acquisitions from op cash, their cash flow is positive for 2008. This will get even better based upon the 2009 plans that they have already talked about.

    They have said that they would use this improved cash flow to enhance shareholder value (read MORE buybacks).

    IF the China domestic market can improve AND they can really deploy those frames AND hold their position in LCDs (~130 in over 50 cities) AND can manage their value plans….investors large and small will buy.

    Headwinds include the overall economy, how efficiently management delivers the plan, and a law-suit getting started against residential frames. Renters in these apartment buildings consider the talking frames near the elevators as a noise pollution where they live.

    Also, giving FMCN a 4 or 5 multiple is stupid. It no longer can be given a 30X because it is not going to see ARG like it had in the past. But, in a reasonable market (late 2009 and 2010) it should fetch a 15X . That puts it closer to $30/share by 4Q09 and $45-$60 in 2010.

    So I remain a bull and will hold my 14,600 shares until management disappoints me.

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